After a bumpy 2023, the autism therapy industry could start to get back on track.
Several large, growing or innovative autism therapy companies either made strides last year or worked through serious headaches. Meanwhile, some indicators show that the sector could be looking up for 2024.
In 2023 the industry faced a historic slump in autism therapy dealmaking activity. The sector saw a 46% reduction in deals to a total of 22. The sector has seen deals totaling about 40 per year since 2018, according to The Braff Group.
“One could argue that, from an M&A perspective, the recent unfortunate developments in autism services could not have happened at a better time,” a report from the Braff Group states. “While would-be sellers would have almost assuredly faced declines in acquisition interest regardless of economic conditions, the industry has been able to use this time to address many of its problems and stabilize performance.”
Those challenges include finding and retaining clinicians and front-line staff, unfavorable payer trends, rationalization of deal multiples and refilling the pool of potential acquisition targets.
Add to that additional scrutiny from regulators and a brewing anti-applied behavioral analysis (ABA) movement, and you have quite the tangle of challenges.
However,industry insiders have previously said the autism sector is “maturing.” Many of the headaches the industry faces are growing pains for a still-developing segment of the health care economy. But 2024 may show us what the industry could look like in the future.
Funding for ABA Centers of America
Private equity’s move into the autism therapy space has been the sector’s defining development for years. Today, the largest autism therapy companies are backed by these firms, having grown to tremendous size with that capital or securing that capital after getting some degree of scale.
Fort Lauderdale, Florida-based ABA Centers of America has grown without private equity funding. Rather, it will continue to grow using capital generated by the business and the backing of its CEO and founder, Chris Barnett, a serial entrepreneur involved with several ventures.
In August 2023, added four new state markets to its footprint. Today, it operates in Florida, Georgia, Massachusetts, New Hampshire, New Jersey, Pennsylvania, Tennessee, Texas and Virginia. It also has its own technological system.
The company’s growth has been recognized by the 2024 Inc. 5000 Regionals list of the fastest-growing privately held companies. It took the No. 1 spot for the Southeast region. Its revenue has grown 6,625% from 2020 to 2022.
“Our mission at ABA Centers is to get kiddos the autism care that they need, quickly, so being recognized for our financial success means we are actually being recognized for the success of our mission,” Barnett said in a news release.
The release again notes the company’s self-funded approach and low debt levels. Several sources indicate that M&A and investment activity could pick up in 2024, especially if the Federal Reserve rolls out interest rate cuts, somewhat freeing up debt financing.
BlueSprig Pediatrics does big deals
BlueSprig Pediatrics, based in Houston, Texas, made one of the only big-time acquisitions in the autism therapy space in 2023. It announced the acquisition of Lakewood, Colorado-based Trumpet Behavioral Health. The acquisition added 37 locations across seven states. Pre-deal, BlueSprig operated 137 locations in 15 states.
The deal was a crescendo for the company’s development. The last deal BHB has tracked involving BlueSprig was its acquisition of Florida Autism Center and its Georgia brand Fusion Autism Center, creating a “top-five national provider” of autism services.
The investment giant KKR & Co. L.P. (NYSE: KKR) formed BlueSprig through investment in its Health Care Strategic Growth Fund six years ago, in 2018. The specifics of KKR’s investment in BlueSprig are not clear.
It’s notable that KKR has held onto BlueSprigfor so long after growing the company to this point. It’s common to see investments in platforms like BlueSprig have a hold period of around five years. The more time that passes, the more likely it is that an exit for the KKR would make sense.
Still, the autism therapy industry faces insatiable demand, high fragmentation and a shortage of providers. Continuing to hold onto a growing, already-commanding platform company in an industry that is still in its relatively early stages of development also makes sense.
360 Behavioral Health rolls on
360 Behavioral Health has “seen an increased number of organizations that have approached [the company] looking for M&A opportunities,” CEO Rob Marsh told BHB late last year.
The company has shaken off a turbulent 2022 and saw pressures on the business improve in 2023, allowing the company to move forward. This includes reconfiguring the company’s approach to talent acquisition and retention. Talent strategies are seen as proxies for successful revenue generation and growth in the M&A space.
Marsh previously said that payers are also moving towards addressing rates and the range of care and services patients with autism require to be healthy. Stagnant reimbursement rates in an economy with accelerating inflation have hobbled many organizations.
The company has focused its efforts on California since its start. Founded in April 2018, the company lists 21 locations in the Golden State on its website. However, it also says that it’s opening an office in Nebraska. A location is not yet available.
The next chapter for the Center for Autism and Related Disorders
Last year was rough for several of the largest autism therapy platforms in the U.S. The several challenges mentioned above brought numerous headaches, including layoffs and service closures. The Center for Autism and Related Disorders’s (CARD) sale via a bankruptcy process was one of the most dramatic happenings, making it a useful avatar for a sector going through it in 2023.
The deal also sees one of the forerunner clinician executives of the ABA-as-an-enterprise era getting back into the industry. After stepping away from the company e, founder and long-time CARD CEO Doreen Granpeesheh is back at the helm. Now the question for the company is what she and her team will do with the company that she grew into a titan of the industry.
We have some ideas of what that will look like. Granpeesheh sat down with BHB’s Perspectives podcast to talk about how she grew the company, why she bought it back from Blackstone, and what she will do now that she has it.
The company has had to lean out its corporate structure and is now focused on growing and keeping its clinician workforce, she said. The company is also looking at expanding ABA access through growing services, such as those for older patients. Much of the industry is focused on early intervention and kids before they reach school age.
What’s next for The Stepping Stones Group’s growth?
The Boston-based The Stepping Stones Group is a rare combination of size and speed in the autism therapy sector. It is both a large incumbent while at the same time still seeing notable growth within its business. Its growth rate, at least in terms of revenue, makes it one of the fastest-growing companies in the U.S., a position it’s held for the last several years.
The Stepping Stones Group landed at No. 2,366 on the Inc. 5000 list, released in August 2023. At that time, it operated in 45 states and served 300,000 children annually via school-based services. Its revenue grew 246% from 2019 to 2022. The growth highlights the power of partnering with other, motivated organizations as well as the increased need for autism and other services for children with intellectual and developmental disabilities.
Over the years, the organization has had a steady streak of acquisitions. These include Catalyst Speech Language Pathology in January 2023, HM Therapy in June 2022, the Center for Behavioral, Educational and Social Therapies (CBEST) in June 2022, Futures Health Group in May 2021 and EBS Healthcare in March 2021.
The company itself was thought to be an acquisition target in 2021, according to media reports. Those reports stated that Five Arrows Capital Partners was working on a competitive sales process for the Stepping Stones Group. The Five Arrows website states it made a “partial” exit in December 2021.
Shore Capital Partners sold The Stepping Stones Group to Five Arrows in a deal announced in 2018.
New name, new year for Tilly Therapy, formerly Elemy
The rollout of Tilly Therapy marks the third brand for the company formerly known as Elemy and Sprout Therapy. Yury Yakubchyk founded the company in 2019 under the Sprout brand. At one time, the company provided ABA and other services in a handful of states.
But at the end of 2022, the company shuttered that division and pivoted to solely focus on the development and marketing of software for autism therapy practices. It laid off several staffers as part of that move and also did layoffs earlier in 2022 after raising large venture capital rounds.
Elemy was once considered a unicorn — having a valuation of over $1 billion — and raised an eye-watering $219 million Series B round, announced in October 2021.
Today, the company offers a digital platform that seems akin with companies such as Alma, Headway and Grow Therapy in outpatient mental health — a digital service that connects patients, providers, payers and payment systems in one place. Tilly Therapy will even help clinicians start their own practice and says it will connect them to patients.
Tilly Therapy partners with schools and pediatricians to help connect those groups with autism therapy and related services. ABA practices can also use the platform for its electronic health record (EHR) and practice management tools.
On paper, the model makes sense. It brings a software industry approach — that of being an mediator and connector in a given space — to the fractured and somewhat tech challenged autism therapy space without taking on the burden of employing clinicians and handling claims. Digital platforms like this in the outpatient mental health space have seen tremendous engagement.
But the jury is still out on what their future holds as a means of providing mental health care and enterprises on their own. Tilly Therapy is somewhat unique in this space and will be a useful forerunner in the future.
What else we are watching
Hopebridge, another giant in the autism therapy space, announced in January that Dennis May would return to the CEO role after handing the reins to David McIntosh for about eight months. McIntosh left the company, according to a Hopebridge representative. May oversaw much of the company’s growth, leading into a rock 2023. How will the company rebound after a troublesome 2023 and a change in the proverbial corner office.
Lighthouse Autism Center continues its de novo growth strategy through the Midwest, a region that doesn’t see a ton of action. Since June, the company has opened five locations in Indiana, Iowa and Nebraska. Its two new locations in Nebraska were the first in that state. It operates locations in Michigan as well.
We’re also looking at models that bring alternative sources of funding and ownership into autism therapy, especially given the backlash and lack of other meaningful funding options to private equity and other big-dollar investments. Houston-based Success on the Spectrum brings the franchise approach to bring ABA to communities with diverse and ideally local ownership, creating the “mom and pop shop” vibe with corporate support. Founded in 2018, the company has sold over 60 territories in which 35 locations are now open.